By Douglas M. Nelson, Esq. – Of Counsel
Imagine building a practice (or any affiliated business in the healthcare arena) that took years to amass patients, thousands of hours of labor, sleepless nights, hundreds of thousands of dollars in costs, and mortgages on a house to obtain bank financing. Through all of your hard work and risk, the practice is now financially successful and has established itself as a prominent provider of specialty services.
Unfortunately, your practice did not (a) adequately protect its intellectual property or (b) conduct due diligence to ensure that the intellectual property it used was its own.
Now, a competitor’s service/product line has a distinctly similar name, a different competitor is using a markedly similar logo, and yet another competitor poached your star employee who lacked a non-disclosure agreement/non-competition agreement and is now utilizing your practice’s trade secrets, patient lists, and industry contacts against you. To top it all off, your practice just received a cease-and-desist letter from a corporation on the other side of the country alleging that the practice’s slogan infringes on their trademark.
These are but a few of the many scenarios that could occur when a medical practitioner does not take proactive measures to protect its goodwill and intellectual property or was likewise using intellectual property haphazardly or without ensuring that there was no other owner of that intellectual property or that appropriate licensing was obtained.
In an era of global business and the information economy, the names, logos, and slogans of products and services, trade secrets, and other intellectual property often start off with little commercial value. However, upon establishing goodwill for the practice and/or creating a popular product or service, the value of a trademark can exponentially increase. For instance, Forbes estimated the value of the trademark for Google® at over $40 billion dollars, or more than one-quarter of the company’s overall value (at the time of the Forbes publication). This holds true for all medical practices and affiliated healthcare entities. Think of any notable brand in healthcare, and you will see that it is trademarked – i.e. Mayo Clinic®, Aetna®, Walgreens®, Medtronic®, Novartis® – and the list goes on.
As intellectual property is a key asset to the vast majority of all businesses (including your medical practice) and is nevertheless important for protection of a business’ goodwill, it is essential to proactively protect intellectual property vis-à-vis trademark, copyright, or trade secrets protections, and to likewise remain cognizant of the intellectual property of others so as not to be subject to a stressful and costly infringement action.
A trademark is a brand name. A trademark or service mark includes any word, name, symbol, device, or any combination, used or intended to be used, to identify and distinguish the goods/services of one seller/provider from those of others, and to indicate the source of the goods/services. For instance, the words Facebook® and Microsoft® are both trademarked, as is Apple Computers’ partially bitten apple logo, and both McDonalds’s golden arches and its slogan “I’m loving’ it.”
Because trademarks serve as an indicator of the mark owner’s goodwill, federal trademark law was established to protect the unsuspecting public from confusing products/services and to prevent against attempts by unscrupulous competitors to deceive the public.
Federal trademark rights may be established by either being the first to use a mark in interstate commerce or a prospective mark may be reserved prior to use by filing an intent-to-use application.
Although the law generally provides that the first user of the mark is entitled to legal protection, with or without a federal trademark registration, federal registration provides significant additional value as it allows for the ability to recover profits, damages, and costs against infringers, national notice of ownership of the mark, the presumption of the validity of the mark, access to federal courts, as well as incontestability status for the mark after five years of federal registration. State registrations are also available, but do not offer the national, comprehensive protection of a federal trademark registration.
In light of the significant benefits of federally registering trademarks (names, logos, and slogans), the ever-increasing value of intellectual property and goodwill to all businesses, be it a solo practitioner or a large medical device company, the need to protect and distinguish a mark from that of a competitor, and to avoid claims of infringement, we encourage our healthcare clients to closely look at protecting their brand and goodwill through trademark protection and likewise ensure their marks are not infringing on those of another business.
Similarly, copyrights protect literary, musical, artistic, and dramatic works such as novels, photographs, movies, songs, etc. Copyrights can also protect creative works outside of the entertainment industry, including articles, blog postings, course materials, designs, graphs, charts, etc.
Unlike a trademark which requires federal filing, a work is copyrighted as soon as it is created. However, benefits are gained by registering a work with the United States Copyright Office. Promptly filing the copyright notice allows the holder to file a copyright infringement lawsuit, provides prima facie evidence of the validity of the copyright, and also provides the holder with the ability to obtain certain damages and attorney’s fees upon prevailing in a copyright infringement lawsuit.
Conversely, while not all businesses produce copyrightable works, businesses must remain cognizant of utilizing the works of others without appropriate rights or licensing. The most common scenario for a business being sued for inadvertently infringing copyrights are entertainment/restaurant establishments showing NFL/NHL/MLB games without an appropriate commercial license or playing music without an ASCAP license. However, businesses also can face infringement actions for using copyrighted images on their website, reproducing a chart, or other seemingly innocuous activities. The same holds true for medical practices.
In short, creators benefit from copyright protection and should register the works they have created, and medical practices and businesses using copyrighted material should be aware of the licensing requirements prior to using such works in a commercial healthcare environment.
Trade secrets, confidential information, proprietary information, and the like, encompass a wide variety of information that a business intends to keep secret and which those outside of the business are not afforded access. A trade secret is often defined as information with economic value that is not generally known to other persons or is easily ascertainable, and the owner of the information has taken reasonable efforts to maintain its secrecy.
Most famously, McDonalds’s Big Mac sauce and the recipe for Coca-Cola, are such types of information. However, more mundane information that almost all medical practices utilize may qualify as a trade secret or otherwise necessitate protection from general release to the public (even apart from HIPAA and other privacy laws). This includes patient/customer/client lists, vendor/supplier lists, processes, know-how, business plans, marketing plans, information on prospects, customer/vendor habits and preferences, creations, inventions, intellectual property (even if unregistered), etc.
Trade secrets are protected at both the state and federal levels, and many states utilize the Uniform Trade Secrets Act as a basis for defining a trade secret and cause of action thereunder. While not all proprietary or confidential information constitutes a trade secret under statute, a substantial amount will.
Given the immense value of intellectual property, medical practices should take appropriate efforts to safeguard their trade secrets, both ensuring internally that employees do not take such information with them to another employer or otherwise use the information for their own benefit, and externally, so that such information is not otherwise obtained by a competitor.
Conversely, in hiring an employee or engaging a contractor, a practice must ensure that the potential employee/contractor is not disclosing protected trade secrets of a prior employer which could drag the business into a costly and time-consuming lawsuit for trade secret misappropriation, which would likely not be covered by any professional liability insurance policy.
As such, we encourage all practices to identify all of their trade secrets and employ appropriate electronic and physical safeguards to protect such information. Likewise, as a service to our clients, we prepare confidentiality agreements to be utilized with anyone privy to the practice’s trade secrets to further protect against disclosure.